THURSDAY JULY 15, 2021 VOL. 186 No. 134 AMERICANBANKER.COM Follow us on Twitter @AmerBanker GreenSky facilitated 5 loans without borrowers’ consent: CFPB Carrying less debt The fintech, which arranges point-of-sale loans in partnership with merchants, was JPMorgan Chase customers are spending more on cards, fined $2.5 million by the Consumer Financial but the company says unusually high payment rates are Protection Bureau and ordered to refund suppressing loan growth up to $9 million to consumers who received loans they never applied for. Page 5 See story on page 2 Freelancing craze Credit card loans 6 offers challenger banks $150B an opportunity This has been dubbed the “summer of $144.2B $141.7B $140.4B $141.8B quitting,” and three neobanks are aiming to $132.5B capitalize on the trend by developing apps that provide budgeting, invoicing and tax $100B calculation to meet the specific needs of contract workers. Page 6 In naming co-CEO, 7 First Republic signals $50B succession plan 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 Hafize Gaye Erkan, the San Francisco bank’s president, will share the chief executive role Source: The company with longtime leader James Herbert, whose contract was extended through 2022. Page 7 FNB buying Howard Bancorp dailybriefing Citigroup’s underdogs 8 to bulk up in Baltimore 3 save quarter as bond, Acquiring the city’s largest bank would give card engines sputter Pittsburgh-based FNB the No. 6 market Flat credit card growth Income from stock trading and investment share in Maryland’s largest city. Page 7 1 at JPMorgan Chase banking trounced analyst estimates in the bodes ill for other issuers second quarter and made up for weaknesses Apple, Goldman plan buy now/ While customers of the nation’s largest bank in the company’s much bigger fixed-income 9 pay later service to rival Affirm are spending more, an unusually small and credit card divisions. Page 3 Apple is working on a new service that percentage of their purchases are becoming will let consumers pay for any Apple Pay debt. Executives warn that the bank’s With Fed picks, purchase in installments over time, rivaling predicament could persist for the rest of the 4 Biden will have to the buy now/pay later offerings popularized year. (See chart above.) Page 2 walk political tightrope by services from Affirm and PayPal. Page 8 The president has a chance to make his BofA struggles with mark on the central bank as the terms of Citi debuts no-fee stock 2 tepid loan income as Federal Reserve Chair Jerome Powell and 10 trading to compete with consumers shun new debt Vice Chair of Supervision Randal Quarles JPMorgan, Robinhood Bank of America fell short of net interest near their end. He will face pressure from Citigroup will let retail customers bet on income projections as loans and leases in progressives to pick reform-minded leaders, stocks without paying fees as the bank tries the consumer banking unit dropped 12% while moderate Democrats and Republicans to expand its wealth business in the face from a year earlier. However, loan balances in the narrowly divided Senate might favor of fierce competition from Silicon Valley grew from the first quarter — the first reappointing Powell. Page 4 ventures, discount brokerages and big- sequential increase in a year. Page 3 banking peers. Page 8 THURSDAY JULY 15, 2021 AMERICANBANKER.COM PAGE 2 stimulus checks, muted consumer May, said that exceptionally low net charge- CREDIT CARDS spending and forbearance on mortgages offs across the bank are offsetting some and other loans have given U.S. households of the headwinds to higher net interest more cash to pay down credit card bills. income. Flat credit Even as vaccination rates rose and In the second quarter, JPMorgan’s net consumer spending ticked upward during charge-offs totaled $734 million, which card growth the first quarter of 2021, card balances was half of the total reported in the second declined by $49 billion, the second-largest quarter of 2020. decrease on record, according to a report Sales volumes on debit and credit cards at JPMorgan from the Federal Reserve Bank of New York. totaled $444.3 billion in the second quarter, Just how long the trend will continue which was up 19% from the first quarter Chase bodes remains to be seen — and depends in and 45% from a year earlier, when much large part on ongoing stimulus efforts. On of the country was locked down during the Thursday, the federal government is set pandemic’s early months. ill for other to begin making child credit tax payments Credit card loans at the bank grew by 7% of $300 a month per child to eligible between March 31 and June 30, but were issuers families, a move that will theoretically give basically flat in comparison with the second an additional boost to many households’ quarter of 2020, the company said. Overall, By Allissa Kline finances. loans grew just 1% in comparison with the July 13, 2021 Like most banks, JPMorgan remains first quarter and were flat compared to the Amid the bright spots in JPMorgan flush with deposits. In the second quarter, second quarter of last year. Chase’s second-quarter earnings report its average deposits surged by 23% from a During Tuesday’s conference call, — including higher consumer spending year earlier and rose by 4% from the first analyst Steven Chubak at Wolfe Research and record revenue in asset and wealth quarter. asked if JPMorgan might see a tailwind to management— there lingers a pesky JPMorgan reported net income of $11.9 net interest income if card payments rates headwind that could persist for several billion, down 16% from the prior quarter return to more normal levels. months. but up 155% from the year-ago period, That’s unlikely to happen anytime soon, Payment rates on credit cards, which when the company stashed away $8.9 Barnum warned, though he said there have been higher than normal during the billion in credit reserves to prepare for could be a tiny increase between the third pandemic, could stay elevated through potential bad loans. and fourth quarters. “I think you want to the end of the year, executives at the $3.7 JPMorgan’s net interest income was be thinking about that as a 2022 effect,” he trillion-asset bank warned Tuesday. If down 1% from March 31 on relatively flat said. cash-flush consumers keep paying off loan demand and lower interest rates. But their balances at unusually fast rates, loan the pace of decline moderated in the second growth will remain muted, even though quarter, analysts at DBRS Morningstar card spending has been rising. noted. As long as an unusually low percentage Barnum, who led his first earnings call of credit card spending gets converted since being promoted to the CFO role in into revolving balances, JPMorgan’s net interest income will suffer, JPMorgan Chief Financial Officer Jeremy Barnum noted Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 during a call with analysts Tuesday. In June, Phone 212-803-8200 AmericanBanker.com the nation’s largest bank by assets reduced its 2021 net interest income guidance from Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 $55 billion to $52.5 billion. Barnum said that JPMorgan expects U.S. Managing Editor Dean Anason 770.621.9935 Reporters/Producers consumers to start taking on more leverage, but added: “We just don’t think it’s likely to Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 be a meaningful effect this year.” Miriam Cross 571.403.3834 Washington Bureau Chief Joe Adler 571.403.3832 JPMorgan, which kicked off bank Jim Dobbs 605.310.7780 earnings season Tuesday, could be a Executive Editor, Technology bellwether for other big banks that rely Penny Crosman 212.803.8673 John Heltman 571.403.3847, Allissa Kline 716.243.2679 heavily on credit card income, since the Hannah Lang 571.403.3855 higher-than-normal payment rate has been Community Banking Editor Paul Davis 336.852.9496 John Reosti 571.403.3864, Gary Siegel 212.803.1560 a phenomenon across the U.S. credit card Contributing Editor Daniel Wolfe 212.803.8397 industry. Kevin Wack 626.486.2341 During the pandemic, government For up to date and complete coverage go to AmericanBanker.com THURSDAY JULY 15, 2021 AMERICANBANKER.COM PAGE 3 through Tuesday, compared with a 27% gain trading for a second straight period, the first EARNINGS for the KBW Bank Index. time that’s happened since 2009. While loan balances remained down from “The pace of the global recovery is a year earlier, they grew from the first quarter exceeding earlier expectations,” Fraser said BofA — the first sequential increase in a year. Wednesday in a news release announcing “Consumer spending has significantly earnings. “We saw this across our businesses, struggles with surpassed prepandemic levels, deposit as reflected in our performance in investment growth is strong, and loan levels have begun banking and equities.” to grow,” Bank of America Chief Executive Net income jumped nearly sixfold to $6.19 tepid loan Brian Moynihan said in a statement. billion, beating the $4.67 billion average Also in the second-quarter results: analyst estimates compiled by Bloomberg as income as • Noninterest expenses rose 12% to $15 the firm released $2.4 billion in reserves. billion. Citigroup’s results broadly mirrored • Net income more than doubled to $9.2 trends across the industry. Most trading consumers billion, or $1.03 a share.